P684.6-million tax case against Pilipinas Shell Petroleum Corp

abs-cbnnews.com (Philippines): “Shell used fraudulently acquired tax-credit certificates to settle its liabilities with the government”

BIR appealing P.7-B case vs Shell; solons vow probe

By DAXIM LUCAS and JODEAL CADACIO

TODAY Reporters

18 August 04

The Bureau of Internal Revenue (BIR) will appeal the recent decision of the Court of Tax Appeals (CTA) to dismiss a P684.6-million tax case against Pilipinas Shell Petroleum Corp., one of two oil companies accused of using fraudulently obtained tax-credit certificates.

BIR officials declared their plan to appeal the case, as lawmakers denounced the apparent bungling by unidentified officials of several cases that caused the State to lose nearly P2 billion in collection cases, and vowed an investigation.

The appeal will be made in the hope of minimizing the State’s losses in the 10-year old tax credit scam cases.

In a telephone interview, BIR deputy commissioner Kim Henares said the tax bureau is already in the process of filing a motion for reconsideration with the CTA.

“We will base our appeal on the dissenting opinion [of Associate Justice Juanito Castañeda Jr.],” she said.

Castañeda disagreed with his fellow CTA judges, saying the prescription period for the collection of taxes does not apply in the case of Pilipinas Shell — a point which the BIR hopes to capitalize on.

“We’re not talking about the prescription period,” Henares said. “The tax liability still remains.”

The BIR official said that, under normal circumstances, tax authorities have only three years to question the tax declarations of taxpayers. In the case of Shell, however, no payment was made.

“There was no payment made,” Henares said. “This is what we’re questioning.” According to records, Shell used fraudulently acquired tax-credit certificates to settle its liabilities with the government.

Henares said the tax bureau will no longer present new evidence since it had already forwarded to state lawyers all the facts necessary for the successful prosecution of the case.

She said, however, that the appeal will only cover cases lost by the BIR.

“This is separate from the [Bureau of] Customs cases dismissed by the CTA,” she said, referring to the tax court’s decision to dismiss 22 tax-credit scam cases due to the apparent lack of interest on the part of government prosecutors to pursue the charges.

Henares said the government’s case against the respondents is solid. “I’m very confident that we will be successful,” she said.

Despite the efforts of the Special Presidential Task Force 156 — whose resources are devoted exclusively to the successful prosecution of these tax-credit scam cases—the government has nothing to show by way of convictions during the last 10 years.

Congressmen on Tuesday expressed outrage over the government’s having taken a “dive” in prosecuting the cases against the tax-scam perpetrators and demanded heads to roll in the departments and agencies tasked to pursue prosecution and collection.

Nationalist People’s Coalition (NPC) Rep. Jesli Lapus of Tarlac, chairman of the House Committee on Ways and Means, said that there was clear gross negligence on the part of Internal Revenue and Customs officials in allowing the tax-scam cases to be dismissed.

He urged the Office of the Ombuds­man to identify and prosecute those responsible for what he called “perdegana” in the interest of justice.

Liberal Party Rep. Abraham Mitra of Palawan urged the Palace to revive the cases against Shell and Petron, and ensure this time that the prosecution panel would not “take a dive like a bribed boxer.”

Mitra said that besides the P700-million case lodged against Shell, Petron had been listed as one of the major beneficiaries of the tax-credit scam, given the fact that it bought P1.153 billion worth of tax- credit certificates between 1992 and 1998.

A subsequent Palace-ordered inquiry during the Estrada administration revealed that at least 140 tax-credit certificates valued at P658.6-million came from questionable firms, mostly from thinly capitalized textile and garment firms owned and managed by Faustino and Gloria Chingkoe.

“The modus operandi revolved around a fuel-for tax credit certificate swap, whereby fuel deliveries made by Petron as well as Shell to the Chingkoe textile firms will be paid in credit certificates,” Mitra said.

“The problem was some of the Chingkoe firms did not own a power generator. Some were no longer in existence when the certificates were brought. In short, the oil firms swapped fuel for bogus certificates issued by phantom firms.”

The House majority leader. Prospero Nograles of Davao City and Nacionalista Party Rep. Gilbert Remulla of Cavite took the justice and finance departments to task for the bungling of the tax-credit scam cases. They moved for a congressional inquiry.

They said that Congress would certainly investigate the matter in the course of deliberations on the proposed new taxes. They said the dismissal of the cases raises serious doubts over the government’s ability to go after big tax dodgers.